Originally published in The Huffington Post
Amongst various circles discussing new technologies these days the subject of blockchain will most definitely be the hottest topic of all. With 2017 just around the corner, blockchain technology has already been listed amongst the top in many different upcoming tech surveys. Despite the fact that the banking & financial services industry has made the most noise and are the most excited, there is a long list of industries who are now realising the potential. As blockchain experts are forecasting, other industries may actually accelerate their process far faster, as they are free of the strictness of regulatory existing in the banking and finance industry. They also don’t have to worry about the risk aversion factor involved in banking and finance.
Will blockchain change everything?
Many experts believe so. There is a long list of gurus out there who are also voicing their opinion about blockchains being the next revolution after the Internet. Every individual participating in a survey taken in a LinkedIn blockchain group survey voiced strong words about their belief in blockchain being here to stay. Furthermore, they are also very confident that this new technology will enormously impact how business is done. Many are already voicing opinions about blockchain engulfing all of our lives, like it or not. It is true that few have taken the steps necessary to actually operationalise the true sense of blockchain technology, focus amongst every single IT service, technology/business consulting firms are shifting, and they are establishing the capacity and foothold needed in this environment. All these companies are placing heavy resources, minds and manpower on blockchain uses cases. As a result, a long slate of use cases have been found in numerous technologies, and the highest potential lies in banking and financial services.
As is the case with every other new and trending technology, any new initiative in the tech world endures only if there is a business necessity and motivation empowering it. Otherwise, it will fade into the darkness no matter how innovative and revolutionary the technology may be. The question remains on what is the motivating and driving force behind blockchain? As we speak the banking and financial services industry is leading the pack in its interest in blockchain technology.
Reason of success
Like many others involved in the tech industry, the banking and finance industry has been successful and received its revenue thanks to their access to data. And of course, this information is not a privilege enjoyed by all those who may be involved. Lack of transparency is the main reason behind this issue. Many believe the world of digitisation is missioned to establish the needed transparency, amongst all those who may be involved, and the method is providing the relevant data equally available. This transparency is expected to be catapulted to a new level by blockchain. All participants in this regard, including banks, competitors, customers and regulators will enjoy access to the same data provided by distributed ledgers. As far as the banking and finance industry is concerned, the two fields where there is a huge lack of transparency, even as we speak, is lending and payments. Due to this lack of transparency, the banks are able to continue making a huge portion of their earnings from the two businesses mentioned above. Blockchain technology will be brought into the mainstream due to the need for transparency seen in customers.
Need for security
There is yet another major challenge facing the banking and finance industry, being none other than security. When people think about their money they are usually very paranoid about the issue of security. A bank may enjoy the highest possible security accommodations, on the planet, hardware and software, one can never guarantee 100% there will not be any breach of security. And once a bank is breached, all fingers are pointed at its direction and they are expected to correct the mayhem immediately. Here is where people come to realise the banks practice very little transparency. However, blockchain technology will enjoy numerous books of authentic records. As a result, not only is there a much lesser chance of fraud in this technology, the mechanism to correct fraud-if there is such a case-will be far more transparent than ever before.
The role of intermediary organisations
The intermediary organisations play the role of being inundated with the banking and finance industry. Exchanges have a major part, and thus any process will be much more painstaking, being any kind of settlement plan; from cash, shares in the stock market or a commodity of any kind. Removing intermediaries is also a capability provided in blockchain technology. The least that blockchain can do is to downgrade the role they play to a minimum, and therefore accelerate any process of settlement that may be in consideration. Such settlements have the potential of becoming direct in relations.
Generally speaking, the imperatives of this industry are pushing all parties involved to adopt a different approach into a more open, collaborated and distributed world of banking.
Ignoring such a market trend will no longer be an option for banks, from the smallest to the largest. The more proactive they will become the sooner they succumb to this harsh reality. This will bring home a much longer list of innovations that can be used to differentiate themselves. This is a necessity in the new business scenario, and it renders more chances of opening eyes in a new spring of such technology advances. Those attempting to stay in the past and resist this eventual development will go extinct.